Americans are losing confidence in the economy

When confidence deteriorates, consumers become worried about
their jobs and their paychecks, which in turn makes them want to
spend less. And considering that personal consumption accounts
for 68% of gross domestic product, the consequences can be huge.

"The recent dip in Americans' economic confidence — which is
being dragged down largely by the lower economic outlook
component — is likely the culmination of a variety of economic
factors," Gallup's Justin McCarthy writes.

"Though stocks rebounded by last Friday, the previous week had
been fraught with market losses in the Dow Jones industrial
average and Standard & Poor's 500 market indexes. Meanwhile,
the prices Americans were paying for gas increased in the latter
half of April, with the US Energy Information Administration
reporting an increase of 17 cents per gallon over two weeks.
Gallup has found that Americans' confidence in the economy is
related to how much they pay at the pump.

But like most economists, Gallup is optimistic this downturn is a
temporary blip.

"Unless the economic news continues to be bad, Americans may soon
forget about the weak first-quarter GDP and rising gas prices,
which, the EIA projects, will stabilize during the summer,"
McCarthy added.

"And even in the midst of last week's negative economic news,
there were bright spots, including the federal government's
reporting increases in consumer spending and a 15-year low in
jobless claims. But last week, the bad news appeared to carry
more weight in Americans' evaluations than the good news."

Gallup's survey included 3,542 responses from adults in all 50 US
states and the District of Columbia.

Here's how the index is calculated: "Gallup's Economic Confidence
Index is the average of two components: Americans' ratings of
current economic conditions and their views of whether the
economy is improving or getting worse.

The theoretical maximum of the index is 100, if all Americans say
the economy is "excellent" or "good" and "getting better." The
theoretical minimum is -100, if all Americans say the economy is
"poor" and "getting worse."